Turkmenistan wants Gazprom to pay more for its gas

Turkmenistan is threatening to cut all gas supplies to Russia unless state-run Russian gas monopoly Gazprom raises its purchase price by more than half.

The Central Asian nation said Gazprom must start to pay $100 (£54) per 10,000 cubic metres of gas instead of the existing $65 price.

Turkmenistan's threat is likely to ring alarm bells in Ukraine.

A large proportion of the gas that Gazprom sells to Ukraine first comes from Turkmenistan.

Knock-on effect

Gazprom cut gas supplies to Ukraine last winter after Kiev refused to pay substantial price increases.

That created a knock-on effect on Russian gas supplies that are piped to Western Europe through Ukraine.

Gazprom and the Ukrainian government were eventually able to reach agreement, under which Gazprom supplies Ukraine with both Russian gas and cheaper gas from Turkmenistan.

Turkmenistan is now threatening to stop all gas sales to Gazprom unless the company agrees to its latest price demands.

Gazprom did not indicate whether it would accept the price rise, but said that if it did so, it would have no effect on gas prices inside Russia because it exported onwards all of the gas it sourced from Turkmenistan.

The central Asian nation currently produces about 60 billion cubic metres of natural gas each year, with two-thirds of its exports going to Gazprom.

Georgian explosions

In addition to its gas disputes with Turkmenistan and Ukraine, Russia also fell out with Georgia over the natural resource in January.

At the time, Russian gas supplies to Georgia were cut by a serious of explosions which damaged pipelines.

Georgia accused Moscow of deliberately cutting supplies to put pressure on its pro-Western government, but Russia countered that the explosions were the result of terrorist attack.

Supplies were eventually restored, but relations between the two countries remain strained.

Western nations are expected to pressure Russia over its energy sector at the coming G8 summit, which is being held in St Petersburg next month.

The knock-on effect of reduced Russian gas supplies to Western Europe during Moscow's dispute with Ukraine stoked fears that the Kremlin could use its energy exports as a political weapon.

As a result, the European Union wants Russia to agree Western trading rules for energy, with free access to the Russian marketplace for overseas firms.

Original Location: http://news.bbc.co.uk/2/hi/business/5101588.stm